A reverse mortgage is a way of converting part of the equity of your home into cash without having to sell your home or making any additional payments. Another term used for reverse mortgages is Home Equity Conversion Mortgage (HECM) and are FHA insured. You retain title to your home while gaining the benefits of the equity in that home. Today reverse mortgage loans are increasingly popular as a financial longevity tool for those that qualify. But good information is hard to find, so we're here to explain some of the basics to help you see if this type of product is right for you.

Some Basic Qualifications for FHA HECM mortgage

An FHA insured HECM reverse mortgage is for homeowners age 62 and over. The home must be in the name of the homeowner, be their primary residence, and they must have considerable home equity. The loan will need to meet minimum FHA standards to qualify.

How does it work?

If you or your parents are 62 years of age or older and have equity in their home, a reverse mortgage may turn that equity into cash tax free*. They may use the money to repay their mortgage, then use any remaining funds to pay for living expenses, food, medical bills, prescriptions or anything else they choose*. Unlike a traditional mortgage, no repayment is required until the home is sold or the owner permanently moves out or passes away. Borrowers can receive funds as a lump sum, a monthly payment, a line of credit or a combination. They can live in their home like they always have and use the value to improve their quality of life.

Increased benefits for Reverse Mortgage Borrowers

Under the American Recovery and Reinvestment Act of 2009, the national lending limit for Home Equity Conversion Mortgage (HECM) reverse mortgage to was raised to $625,500. With this new lending limit, you may be able to access an increased cash benefit.

This is a non-recourse loan: no other assets secure this loan except the house itself. If the buyer home's value ever was less than the future loan balance, the buyer is not responsible for the difference (sometimes called 'underwater'). If there is equity in the home when the last borrower either sells, moves, or passes away, it still goes to the estate.

*consolidating debt may result in higher overall interest cost over the life of the loan. Consult a financial adviser on paying short term debt with a mortgage loan.

For more information or to apply contact reverse@franklinlc.com or call 760-779-8100 and ask to speak to someone about a reverse mortgage.